Most insurance policies can be purchased through private insurers. Flood insurance, however, can usually only be obtained through the National Flood Insurance Program (NFIP).
This government program has rules and regulations that are different from private insurance, and these differences can cause frustration and confusion for consumers looking for flood insurance.
Below are some frequently asked questions about flood insurance and their answers.
Why can’t I buy flood insurance RIGHT NOW?
Flood insurance is one of those policies that people don’t think they need until they do. The storm of the century is bearing down or the levy is about to break, and those without flood insurance want to purchase it right away.
Insurance is meant to mitigate accidental risk, those things that cannot be foreseen. With a flood bearing down, it is not in the best financial interest of the flood insurance carrier to sell a policy that might pay out face value before the premium check even clears the bank.
NFIP has a 30-day mandatory waiting period on all new flood policies, meaning the policy goes into effect 30 days after the purchase date. They do allow for policies with no waiting period, but only in the event of a loan closing where the mortgagee or bank requires flood coverage.
Buy flood insurance before you need it, so if you ever need it, it will be there for you.
Why is flood insurance so expensive?
The price of flood insurance depends on many factors:
- Your proximity to waters that may be subject to flooding (oceans, gulfs, bays or rivers).
- The height above sea-level where your home or commercial building is located.
- The height of your commercial building or home to the adjacent grades (if you’re lower, you’re more likely to flood).
- Proximity to or inclusion in a floodplain.
Floodplain plays an important factor in calculating your flood zone and the risk of flood in your area. There are different types of floodplains, including 10-year, 100-year and 500-year floodplains.
The more susceptible your area is to flooding, the more expensive your policy will be.
Why can’t I purchase more flood insurance?
NFIP puts a cap on the amount of flood insurance that may be purchased. At this time those caps are limited to the replacement cost value of the structure or the one of the following values (whichever is lower):
- $250,000 on residential homes
- $500,000 on commercial buildings
- $500,000 on co-op residential buildings
- $250,000 per unit on condominium buildings
Contents coverage is not automatically included, but is also limited. Residential buildings and rental homes are limited to $100,000 in contents coverage per unit or building insured. Commercial properties are limited to $500,000 in contents coverage.
The NFIP was created in response to lack of flood insurance in the private insurance marketplace and increases in federal disaster assistance due to flooding. NFIP limits are meant to be a starting point for home and business owners to obtain flood coverage. Additional limits of coverage are available in the private insurance market as excess flood coverage over and above the initial NFIP limits.
When it comes to flood insurance, NFIP limits are usually not enough. Talk to your Hayes Broker about excess flood insurance and insuring your home or business to value before disaster strikes.